Airfreight space tightening up for ex-China North America-bound cargoes

The space for airborne cargoes bound for North America from China is getting tighter in view of the upcoming sale of the new iPad, Apple's latest tablet computer. Space is becoming increasingly unavailable not only for direct flights from Shanghai, but also on flights via Hong Kong, Seoul and Japan, indicating that all flights to North America are now generally booked to full capacity in terms of cargoes. Freight rates of ex-China North America-bound cargoes have been on a downward trend since 2010, dropping to a level that put a significant pressure on the businesses of airline companies. Things drastically improved at the turn of March this year, however, making it seem that the level recorded prior to the decline will be reached again. As a result, it has become difficult to secure space even in ex-Japan North America-bound flights.

The new iPad will be out in the market on March 16 and in preparation for that date, the transport of the finished products has apparently begun at the turn of March. The iPad is manufactured in China's inland provinces of Chengdu and Chongqing, but direct flights to North America from the two areas are limited, so there seems to be a large number of cases when the cargoes are hauled from other airports via Shanghai. According to a Japanese-affiliated carrier in Shanghai, there are also a growing number of charter flights run from Chongqing by Chinese-affiliated carriers. The demand is high for the transport of the iPad to the U.S. West Coast, particularly to Los Angeles.

The iPads are mainly transported using large-size freighters, but space availability has become tight, so even the passenger flights of Japanese-affiliated carriers are frequently used now. The tablets are flown to Los Angeles and other cities via Narita. "We have been fully booked from last week until this week for North America-bound shipments in that there are many cases when we have to turn down reservations already," claimed a source from an Asian-affiliated airline company that operates freighters. However, the bookings are not full until the end of the month and it is unclear until when the demand will continue. The iPads are also being hauled by sea, so when the purchasing demand cools down, then it is also possible that the shipments will be diverted to ocean transport.

In addition to the tightening space in ex-China flights, the freight rates are also rising, so it has become more difficult to secure space in North America-bound flights from Japan. A related source from the industry said that, "Unless they have cargoes with high density, then it would be difficult to secure allocation on ex-Japan flights." The demand for automotive parts has also been robust since the latter half of 2011, so it seems that the increased cargo traffic activity to North America has also fueled the further tightening of the space availability.

But the sharp rise in ex-China freight rates does not necessarily mean that the freight rates on ex-Japan flights are also on the way up. However, if the tightness in space prevails, then carriers will be forced to raise their freight rates. From the perspective of airline companies that are struggling from the plunging freight rates, the recent development will serve as a positive factor toward the restoration of freight rates. However, it is unclear up to when the demand will last, so the carriers seem to be having second thoughts about freight rate hikes for now. Even a Chinese-affiliated carrier pointed out that, "This restoration in freight rates is only temporary, as the rates will probably fall again by next month."